Strategy Clock
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STRATEGY CLOCK
Whereas Michael Porter's generic approach to competitive advantage gives substantial prominence to low cost, Cliff Bowman's' Strategy Clock' looks at generic competitive advantage from a purely market-based perspective (MBV). He argues that competitive advantage is of no value unless it is of value to the customer and that a customer will always have a preference for such products or services over those of competitors. This may seem obvious but managers do sometimes fail to ask the most basic questions relating to what the market values. Bowman argues that customers may choose to purchase from one source rather than another because either a) the price ofthe product is lower than competition or b) the product from one firm is more highly valued by the customer than from another firm. Important implications flow from these generalizations.
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4. Differentiation
Perceived
Added value
2. Low price
FAILURE
TEGIES
7
Low price/
Added value
!-)
Price based strategies: Routes
I & 2.
Price
o o
Route l:'Cheap and nasty' option which entails reducing price and perceived value- added and focusing on a price-sensitive segment. Might be valuable in segments of the market in which customers cannot afford to buy better goods, eg. clothing
Route 2: Taken to seek advantage over competitors. Entails reducing price whilst try/ing to maintain quality. This can lead to imitation by competitors. Therefore the only way to offer advantage here is to consistently offer a lower price whilst competitors cannot do so to the same extent. This strategy therefore favours cost leader- Companies which do not have cost leadership but chooses to compete on price can face reductions in margins leading to investment downturns.
Hybrid strategy: Route 3.
o
It is possible to sirnultaneously provide added-value in customer terms while keeping prices down. Japanese firms do this. Here the success of the strategy depends on the
STRATEGY CLOCK
Whereas Michael Porter's generic approach to competitive advantage gives substantial prominence to low cost, Cliff Bowman's' Strategy Clock' looks at generic competitive advantage from a purely market-based perspective (MBV). He argues that competitive advantage is of no value unless it is of value to the customer and that a customer will always have a preference for such products or services over those of competitors. This may seem obvious but managers do sometimes fail to ask the most basic questions relating to what the market values. Bowman argues that customers may choose to purchase from one source rather than another because either a) the price ofthe product is lower than competition or b) the product from one firm is more highly valued by the customer than from another firm. Important implications flow from these generalizations.
/-.\
4. Differentiation
Perceived
Added value
2. Low price
FAILURE
TEGIES
7
Low price/
Added value
!-)
Price based strategies: Routes
I & 2.
Price
o o
Route l:'Cheap and nasty' option which entails reducing price and perceived value- added and focusing on a price-sensitive segment. Might be valuable in segments of the market in which customers cannot afford to buy better goods, eg. clothing
Route 2: Taken to seek advantage over competitors. Entails reducing price whilst try/ing to maintain quality. This can lead to imitation by competitors. Therefore the only way to offer advantage here is to consistently offer a lower price whilst competitors cannot do so to the same extent. This strategy therefore favours cost leader- Companies which do not have cost leadership but chooses to compete on price can face reductions in margins leading to investment downturns.
Hybrid strategy: Route 3.
o
It is possible to sirnultaneously provide added-value in customer terms while keeping prices down. Japanese firms do this. Here the success of the strategy depends on the